Strategies for long-term profitability in the financial sector through credit card rewards schemes
In the ever-evolving world of finance, credit card loyalty programs are undergoing significant changes to better engage customers and foster long-term relationships. These transformations are centred around four key trends: relationship banking, personalisation, point ubiquity, and flexibility in reward structures.
Relationship Banking
Loyalty programs are being designed to deepen long-term customer relationships by aligning rewards with broader financial behaviours and commitments. Tiered loyalty programs, such as Bank of America’s Preferred Rewards, incentivize customers to maintain higher balances, fostering mutually beneficial engagement and enhancing the overall banking experience.
Personalisation
Advanced technology, including real-time processing and scalable APIs, enables highly personalised rewards experiences that adapt to individual spending patterns and preferences. Brands now use embedded finance platforms to deliver instant, tailored rewards triggered by specific debit or credit transactions, improving relevance and customer satisfaction.
Point Ubiquity
Programs are evolving to make earning and redeeming points more seamless across multiple channels and partners. This includes co-branded cards and integration with retail and hospitality sectors to reward customers on a broader range of everyday transactions, not just credit card spend. Such ubiquity increases program appeal and usefulness.
Flexibility in Reward Structures
Programs are moving away from rigid, spend-only models toward more modular, inclusive, and economically sustainable loyalty solutions. This flexibility includes supporting debit and credit products, multiple sponsor banks, and various ways to redeem points, thereby catering to diverse customer needs and preferences effectively.
Loyalty programs are increasingly managed via API-first platforms, which reduce complexity and accelerate time to market, making it feasible for brands to innovate more rapidly and scale effectively. This technological shift supports continuous year-round engagement strategies rather than seasonal promotions, enabling more consistent customer interaction and value delivery.
Cardholders can tailor their rewards structure based on their spending habits, fostering deeper engagement and long-term loyalty. Offering rewards for actions like opening a savings account or using a mortgage product can motivate cardholders to engage more broadly with a bank's services. Easier and more flexible redemption processes can foster stronger loyalty and reduce churn among cardholders.
To balance costs and value, card programs need to adjust their reward structures, with some rewards priced higher than others to maintain a sustainable program. Each business type has different interchange costs, and issuers must strategically select which categories to include in their program, or if an earn cap is necessary to maintain its financial viability.
In 2025 and beyond, loyalty programs will evolve past traditional points accumulation, requiring a more flexible approach that weaves rewards naturally into the customer experience. Drew Slater, Director, Strategic Consulting at Kobie, notes that a significant portion of respondents in Kobie’s 2024 Loyalty Study expect their credit card program to offer flexible redemption options, ranging from 53% to 84%.
Banks and credit unions are focusing on loyalty strategies to deepen relationships with customers and members. Customer data and shopping preferences can inform decisions about reward pricing, allowing issuers to price rewards based on what's most valuable to individual cardholders. Implementing personalisation effectively requires careful thought, especially when balancing the rewards structure with the financial sustainability of the program.
A personalised and flexible rewards experience is becoming the norm within loyalty, and banks are empowering cardholders to co-create their loyalty programs. This shift towards relationship banking, personalisation, point ubiquity, and flexibility in reward structures is set to redefine the landscape of credit card loyalty programs in 2025 and beyond.
- As the trend of relationship banking grows, credit card loyalty programs are designed to incentivize customers to maintain higher balances, deepening long-term relationships by aligning rewards with broader financial behaviors and commitments.
- Banks and credit unions are leveraging advanced technology to deliver highly personalized rewards experiences, adapting loyalty programs to individual spending patterns and preferences through real-time processing and scalable APIs.
- In the upcoming years, loyalty programs will evolve to offer flexible redemption options, such as redemption for actions like opening a savings account or using a mortgage product, catering to diverse customer needs and fostering stronger loyalty.
